Monte Carlo Methods for Statistical Inference

• James E. Gentle
Chapter
Part of the Statistics and Computing book series (SCO)

Abstract

Monte Carlo methods are experiments. Monte Carlo experimentation is the use of simulated random numbers to estimate some functional of a probability distribution. A problem that does not have a stochastic component can sometimes be posed as a problem with a component that can be identified with an expectation of some function of a random variable. This is often done by means of a PDF decomposition. The problem is then solved by estimating the expected value by use of a simulated sample from the distribution of the random variable. Monte Carlo methods use random numbers, so to implement a Monte Carlo method it is necessary to have a source of random numbers. On the computer, we generally settle for pseudorandom numbers, that is, numbers that appear to be random but are actually deterministic. Generation of pseudorandom numbers is the topic of Chapter 7. Often, our objective is not to simulate random sampling directly, but rather to estimate a specific quantity related to the distribution of a given sample. In this case, we may want to ensure that a chosen sample closely reflects the distribution of the population we are simulating. Because of random variation, a truly random sample or a pseudorandom sample that simulates a random sample would not necessarily have this property. Sometimes, therefore, we generate a quasirandom sample, which is a sample constrained to reflect closely the distribution of the population we are simulating, rather than to exhibit the variability that would result from random sampling. Because in either case we proceed to treat the samples as if they were random, we will refer to both pseudorandom numbers and quasirandom numbers as “random numbers”, except when we wish to emphasize the “pseudo” or “quasi” nature. In this chapter, we discuss various ways random numbers are used in statistical inference. Monte Carlo methods are also used in many of the techniques described in other chapters.

Keywords

Markov Chain Monte Carlo Method Statistical Inference Importance Sampling Pseudorandom Number
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